More relief for Western Canada gas producers enduring pipeline bottlenecks is on the way with Calgary-based TransCanada Corp. announcing Monday a $570-million proposal to add capacity to cover 2.7 billion cubic feet per day of firm contracts on its Nova Gas Transmission Ltd. system by 2018.

Dozens of Calgary-based oil and gas companies that operate in western Alberta and northeastern British Columbia have reported interrupted production over the summer as natural gas gushing from horizontal, multi-fractured wells overwhelm systems operated by TransCanada and Spectra Energy. The Alliance Pipeline was also shut down for several days after sour gas accidentally entered the system.

“There’s a lot of capacity in Alberta but, in many cases, it’s in the wrong place. Horizontal drilling has changed where we drill,” said Jim Evaskevich, chief executive of junior Yangarra Resources Inc., which uses TransCanada to take gas to market from its land base north of Rocky Mountain House in west central Alberta.

“We lost a lot of production this year, although currently we don’t have much cut back. What we don’t have visibility on, would be around whether this is going to be a permanent situation or whether there are more cutbacks coming.”

He estimated Yangarra’s average production this year will be 15 to 20 per cent lower because of the pipeline interruptions mainly caused by reduced allowable pipeline pressures and maintenance issues. In the third quarter ended Sept. 30, the company reported production of 2,160 barrels of oil equivalent per day, down 29 per cent from the same period in 2014.

TransCanada said its 2018 expansion program represents the minimum system addition required to cover contracts and additional expansions may be planned if identified in an assessment this year. It said it intends to make application to the National Energy Board in the second half of 2016 to build the 2018 projects, which include a total of 88 kilometres of 20- t0 48-inch diameter pipe, a new compressor and 35 new meter stations.

The expansion would be in addition to $7.5 billion of projects already announced on the Nova system. About $2.8 billion worth has regulatory approval, with $800 million in projects under construction and an additional $1.7 billion under regulatory review.

“Our NGTL System is sitting on top of extensive natural gas supplies, making it well-positioned to unlock the resource and reliably and efficiently link it to growing markets,” said Russ Girling, TransCanada’s president and chief executive, in a news release.

“The system has been operating at capacity, and more capacity is needed in these key areas that support the growth of the prolific gas resource in the Western Sedimentary Basin.”

Evaskevich pointed out that low commodity prices have taken some of the sting out of reduced access to markets, adding constraints in the past have usually accompanied higher prices which spur more drilling.

Analyst Robert Kwan of RBC Dominion Securities said in a morning note to TransCanada investors that the investment is a positive growth step.

“We think that this specific announcement will have a slightly positive impact on the share price with our enthusiasm tempered by the relatively small size of the expansion,” he wrote.

TransCanada shares closed three per cent higher at $42.56 in Toronto.

Spectra spokesman Jesse Semko said Monday the Houston-based company has proposed three expansion projects in B.C. — prompted by customer demand —worth about $1 billion.

The High Pine expansion, now undergoing regulatory review, is expected to add 240 million cf/d of capacity by late 2016, all of which would go east into the Nova system. The Jackfish Lake expansion application has also been filed and would add 137 million cf/d.

Spectra’s reliability and maintenance project, which will be built in pieces through 2018, is to upgrade the system south of Station 2 with additional compressors and “crossovers” that keep pipeline segments going during maintenance.

“The system was traditionally designed to be a winter system so that’s why we do maintenance-repair work in the summer and then operate at higher capacity in the winter,” he said. “We’re seeing more demand from customers in the summer.”

Comments

We encourage all readers to share their views on our articles and blog posts. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, and please keep your comments relevant and respectful. If you encounter a comment that is abusive, click the "X" in the upper right corner of the comment box to report spam or abuse. We are using Facebook commenting. Visit our FAQ page for more information.

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Market to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.